For most Americans, the standard advice on Social Security is simple: “Delay until age 70.” The logic is that you receive a guaranteed 8% increase for every year you wait, which acts as “longevity insurance.”
However, as reported by FEDweek, this generic “break-even” math often fails federal employees. Why? Because the standard advice assumes Social Security is your only guaranteed income. For FERS and CSRS retirees, the “three-legged stool” (Pension, Social Security, and TSP) creates a complex web of tax interactions and opportunity costs that a simple age-based calculator cannot see.
If you are following the “wait until 70” rule blindly, you might be optimizing your Social Security check while accidentally shrinking your total net worth.
📉 The “Bridge” Trap: Opportunity Cost of the TSP
The standard advice ignores the unique “gap” years federal employees face. Most FERS employees retire at their Minimum Retirement Age (MRA), often 57–60. They receive the FERS Special Retirement Supplement (SRS), which mimics Social Security until age 62.
At age 62, the SRS stops. You face a choice:
- Turn on Social Security: Accept a reduced benefit (roughly 70% of the full amount).
- Delay Social Security: Withdraw heavily from your TSP to “bridge” the income gap until age 67 or 70.
Sound Data: The “Growth” Penalty While delaying Social Security offers an 8% “guaranteed return,” spending down your TSP to fund that delay has a massive opportunity cost.
- The Reality: If your TSP is invested in the C/S Funds, historically averaging 8–10%, draining those assets in your 60s to buy a higher Social Security check in your 70s can leave you with a smaller total nest egg.
- The Break-Even: For the general public, the “break-even” age for delaying is often cited as 78–82. For federal employees who must aggressively liquidate TSP shares to bridge the gap, that break-even point can push well into the late 80s, meaning you might die before the strategy pays off.
⚠️ The “Tax Torpedo”: Concentration Risk
The biggest danger of the “wait until 70” strategy for federal employees is the Tax Torpedo.
Federal retirees have a taxable FERS/CSRS pension. Most have a large Traditional TSP balance (also taxable). If you delay Social Security until 70, you are effectively “stacking” three major income sources into your later years:
- Your Pension (which likely received COLAs).
- Your Maximized Social Security (up to 132% of your benefit).
- Required Minimum Distributions (RMDs): At age 73 (or 75 for those born 1960+), the IRS forces you to withdraw from your TSP.
The Result: This income concentration can push you into a tax bracket where your marginal rate spikes effectively to 40%+ or triggers IRMAA surcharges that double your Medicare premiums.
- The Optimization Flaw: You maximized your Social Security check, but you minimized your net spendable income because you handed the gains back to the IRS.
🛡️ Holistic Planning Over “Rule of Thumb”
Social Security cannot be viewed in a vacuum. It must be integrated with your FERS annuity and your TSP withdrawal strategy.
Internal Benefit Advisors specializes in this specific intersection of benefits. We don’t just run a Social Security calculator; we run a “Net Income” analysis.
How We Optimize Your Claiming Strategy:
- Tax Bracket Management: We analyze whether claiming Social Security early (e.g., 62–67) allows you to keep your taxable income lower in your 70s, reducing RMD/IRMAA exposure.
- TSP Preservation: We calculate the long-term impact of preserving your TSP assets for growth versus draining them to delay Social Security.
- The “Gap” Strategy: We help you structure your withdrawals during the critical post-SRS years (62–67) to ensure cash flow without liquidating your portfolio in a down market.
Don’t let a generic rule ruin a specific plan.
Contact Internal Benefit Advisors today for a Social Security and RMD tax analysis.
References
- FEDweek. “Why Standard Social Security Optimization Falls Short for Federal Employees.” January 28, 2026.
- Financial Planning Association. Understanding the Tax Torpedo and Its Implications.
- Social Security Administration. Effect of Early or Delayed Retirement on Retirement Benefits.
- Internal Benefit Advisors. Retrieved from https://internalbenefitadvisors.com
